Analysts say Durango casinos got off to a fast start, Red Rock has low risk of cannibalization
Following the Dec. 5 debut of Red Rock Resorts' (NASDAQ: RRR) new Durango Casino & Resort southwest of Las Vegas, the game Analysts at the company say it's off to an impressive start.
The $750 million site is designed to fill a rapidly growing void in the city's southwest corner, even though the area is not yet filled with casino hotels. With 750,000 square feet of gaming space, a sportsbook, 2,000 slot machines and 40 gaming tables, as well as numerous food and beverage (F&B) venues, Durango attracts traffic from a primarily young demographic.
"Management has noticed and been pleasantly surprised by the younger demographic at Durango and other hotels, with 25- to 35-year-olds making up a larger share of the casino floor and food and beverage outlets." Deutsche Bank analyst Carlo Santare Leigh wrote in a note to clients on Tuesday.
Santarelli, who attended the opening in Durango, rates Red Rock a "buy" with a price target of $54, which would imply slight upside from Tuesday's closing price of $53.20.
Durango has a lower risk of cannibalism
Some market watchers are concerned that the new Durango Red Rocks hotel and casino of the same name in Summerlin could take away business. Gaming executives acknowledged that could be an issue in Durango's infancy, but Red Rock enthusiasts may return to the venue at some point.
"Despite overlap and concerns that Durango could cannibalize demand at Red Rocks, attendance was actually higher for both Red Rock and Orleans during Durango's opening week compared to last year, likely reflecting the current season," Bank of America said. NBA Championship," analyst Sean Kelly noted. "While there are no signs of cannibalization yet, we continue to monitor and model and expect Red Rock resident income to decline approximately 4% year over year in 2024 to reflect new competition. Based on relative valuation alone, our rating remains Low below average.”
Regarding the risk that rival properties could lose some business to Durango, Boyd Gaming Inc. (NYSE: BYD ) Kelly mentioned Orleans. Boyd's Suncoast also may be at risk of losing some business to the new Red Rocks venue due to its proximity to Durango.
Red Rock management said Durango is off to an impressive start, Santarelli said, noting the venue should be profitable from day one. Bank of America's Kelly added that when fully operational, the property could generate nearly $160 million in annual earnings before interest, taxes, depreciation, and amortization (EBITDA).
Durango boosts Las Vegas locals
Like most Red Rock casinos, Durango is designed to appeal to the local Las Vegas population. The venue's impressive food and beverage service seems to have helped.
Another pleasant surprise, although related to demographic factors, is the demand for lodging late at night, particularly in the restaurant sector, as strippers come home from work and eat in their neighborhood to find a place to stay before heading home. Santarelli concluded.
Bank of America's Kelley expects Durango's visitor numbers to hold steady at 10,000 per day, down from Red Rock's daily average of 13,000, according to data from Wynn Resorts' (NASDAQ: WYNN) Encore Boston Harbor.
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Source: www.casino.org
